Honesty as growth multiplier

A survey of global firms finds a trend in honesty: More corporations are experiencing fewer losses to corrupt competitors who are still willing to pay a bribe. It seems running a business with integrity in a corrupt environment can be profitable.

Bythe Monitor's Editorial BoardApril 17, 2016

Demonstrators demanding the impeachment of Brazil's President Dilma Rousseff march during an April 17 protest in Sao Paulo next to large inflatable dolls of former President Luiz Inacio Lula da Silva in prison garb and President Rousseff wearing a presidential sash with "Mother of Big Oil" written on it in Portuguese, in a reference to the corruption scandal involving Brazilian oil giant Petrobras.

For a company that sells high-quality products or services, paying a bribe overseas can still sometimes be very tempting. The fear of losing business to a corrupt competitor is strong – often stronger than the fear of being caught. The same temptation may be felt among athletes about doping or among students about cheating on a test.

In the United States, federal officials often feed into this corporate fear of losing out. American companies are being harmed by global corruption, says Assistant Attorney General Leslie Caldwell, who enforces anti-bribery laws. “The negative effects of foreign corruption inevitably flow back to the United States,” she says.

Yet fear need not be the driving force in US anti-corruption efforts. What if running a transparent and honest corporation in a corrupt environment is actually profitable?

The idea is hardly new, yet too often forgotten. The founder of a large German engineering firm, Robert Bosch, wrote in 1921: “In the long term, an honest and fair approach to doing business will always be the most profitable one.” In the 19th century, Chinese scholar Feng Guifen attributed Britain’s success in trade and business in part to “the necessary accord of word with deed,” or moral integrity.

Recent surveys show this idea is not fantasyland. A global consultancy, Control Risks, has been conducting interviews for years with hundreds of companies worldwide and has noticed this trend: “Companies from countries with tight enforcement report fewer losses than before from corrupt competitors. In 2006, 44 percent of US companies said they had lost out to corrupt competitors, compared with only 24 percent in 2015.” A similar trend is noted for Germany and Britain.

What has changed? The survey finds that 81 percent of companies say anti-corruption laws “improve the business environment for everyone.” Honesty is its own growth multiplier.

But more than anti-graft laws are the reason. In many countries, from India to Brazil to Indonesia, a popular demand for honest governance – mainly by the middle-class – has pushed politicians to act. Much of the political turmoil in Brazil, for example, can be attributed to a public cry for leaders with clean hands. In addition, more countries have seen whistleblowers come forth to expose corruption. This was the case in the recent release of the Panama Papers, which highlighted the use of tax havens to hide ill-gotten money.

A company’s long-term competitive advantage does not lie in its ability to pay bribes but in its resources, talent, and hard work. Success cannot be bought with an envelope of cash to a government official. Nor can the world create a level playing field for business simply out of fear of corruption’s effects. Companies that stick to a culture of integrity can also easily turn a profit – and resist the temptation of bribery.